On March 28, 2013 the Postal Regulatory Commission approved a settlement agreement between the Alliance of Nonprofit Mailers and the United States Postal Service resolving a dispute over differences between the work-sharing discounts for nonprofit Standard Mail and commercial Standard Mail.

California State Senate Bill 323 would take away tax exemptions from youth groups that do not accept gay, transgender or atheist members.

The Charitable Giving Coalition has announced the creation of a new website. Visit the website.

Federal

ALLIANCE OF NONPROFIT MAILERS SETTLEMENT.On March 28, 2013 the Postal Regulatory Commission approved a settlement agreement between the Alliance of Nonprofit Mailers and the United States Postal Service resolving a dispute over differences between the work-sharing discounts for nonprofit Standard Mail and commercial Standard Mail.

Comment: Once again this important trade association has acted to help the nonprofit community.

APPLICATION FOR CHARITABLE STATUS SLOWING.According to the Internal Revenue Service in 2010 there were 1.3 million charities. In 2012 there were 1.1 million charities with only 1,761 organizations receiving tax-exempt status for the year. The marginal decrease is explained, in part, by the number of charities dropped by the IRS after failing to file their informational tax returns. Of those organizations that filed in 2012, 87% were approved and only 1% were denied.

State

CALIFORNIA.The fight over unattended clothing bins continues. A state senator has taken up the cause with a bill that would make it easier for property owners to have unauthorized bins towed away from their property. The legislation is being sponsored and promoted by Goodwill Industries International. According to published reports, critics of the bill claim that Goodwill Industries is simply trying to squash its competition. * * * * *Senate Bill 323 would take away tax exemptions from youth groups that do not accept gay, transgender or atheist members. This is seen as an attempt to pressure the Boy Scouts of America to lift its ban on gay scouts and trooper leaders.

CONNECTICUT.The foundation controlling the bulk of the donations for the victims of the Sandy Hook Elementary School shooting has announced it will commence making distributions in late April. The foundation is holding $11 million, and indicated it intends to release $4 million to the forty families most severely affected by the tragedy. The foundation has promised complete transparency.

FLORIDA.Florida is amending a portion of its law pertaining to telemarketing on behalf of nonprofits. According to the sponsors of the legislation, its purpose is to bring Florida law in line with the Telemarketing Sales Rule promulgated by the Federal Trade Commission. The problem, however, is that the wording can be given an overbroad reading which would make the legislation unconstitutional.

Comment: We urge the legislature to go back and re-write it more narrowly. Sloppy legislation leads to bad laws.

* * * * *Long-time regulatory consultant, Max Smith, has advised that he is taking medical leave to deal with some health issues. Our best wishes to him for a quick return.* * * * *The press release which accompanied House Bill 155 involving sweepstakes gave the false impression that the state had materially altered the right of nonprofit organizations to engage in promotions that did not involve consideration, but did involve the combination of chance and prize. In reality, the legislation was a reaction to nonprofit game promotions that involved improper internet gambling which resulted in a series of indictments in the state. The new law prohibits nonprofit entities and charitable organizations from operating a game promotion. The definition of a “game promotion,” however, does not include such promotions as sweepstakes that only involve charitable donations.

KENTUCKY.Senate Bill 32 would impose more point-of-solicitation disclosures on professional solicitors. In addition to announcing professional status of the solicitor, the law would require a disclosure of a telephone number or an e-mail address. The legislation also requires what appears to be an unconstitutional point-of-solicitation disclosure regarding unattended clothing bins that are operated by professionals.

LOUISIANA.Here is another example of government’s continuing attempt to narrow any tax exemptions for nonprofit organizations. In this case, the organization preserved land for conservation purposes. It applied for real estate tax exemption but was denied because it failed to demonstrate that it “alleviates the burdens of government to be considered a charitable organization entitled to exemption.”

MAINE.Assistant Attorney General Carrie Carney has left the charitable solicitation section. The division announced that her replacement is Assistant Attorney General Michael Miller.

MASSACHUSETTS.A fund has been established (One Fund Boston) to help the bombing victims. Kenneth Feinberg, who managed the 9/11 Victim Compensation Fund has been named to head this new effort. Mr. Feinberg is a Brockton, Massachusetts native and acts as chairman of the John F. Kennedy Library Foundation board.

MICHIGAN.The impact of eliminating tax credits for donations to homeless shelters and food banks is now being felt throughout the state. The Detroit Free Press reported that in 2011, approximately 234,000 Michigan taxpayers claimed $19.5 million in tax credits through donations to homeless shelters and food banks. Another 36,000 received tax credits for donations to community foundations in the amount of $3.5 million. The author of the legislation to eliminate the tax credits responded to the report by saying it was necessary in order to balance Michigan’s budget.

MISSOURI.The Kansas City Art Institute instituted legal proceedings against a donor for violating a pledge. A written agreement provided for the Art Institute to build a building in honor of the donors who were to make a series of contributions over a period of years. However, business reverses made that impossible for the family, which is now facing potential bankruptcy.

NORTH CAROLINA.House Bill 893 would call for a commission to study a $100,000 salary cap for employees of state-supported nonprofits. Another controversial part of the legislation also mandates that research take place to determine whether the state could ban the use of tax dollars for salaries of executives of nonprofits that receive state funds.

OREGON.Its back! The attempt by the Oregon legislature to pass a bill aimed at “under performing” by charities has been reintroduced. The bill, if passed by the Senate (it has already been passed by the House), would apply to charities that spend less than 30% on average for program service in the preceding three years. If that is the case, then they would be required to tell Oregon donors that they cannot deduct their gifts on their state income taxes. This legislation was introduced last year but did not pass. A nonprofit trade association in Oregon testified on behalf of the bill. Last year, the Direct Marketing Association’s Nonprofit Federation opposed the bill.

Comment: Any bill that requires a disclosure of compelled speech based upon financial efficiency is constitutionally suspect. It is disappointing that a trade association of nonprofits would support this kind of legislation.

PENNSYLVANIA.According to a report issued by the state’s Legislative Budget and Finance Committee, nearly half of the 662 nonprofit service providers for the state have employees who receive over $100,000 in annual compensation. The report further stated that 910 individuals had an income of over $200,000 and 39 had received compensation in excess of $1 million. * * * * *The state is looking at taking legislative action to amend the state constitution to grant itself authority to set the criteria for determining what qualifies as an institution of purely public charity as to be eligible for various state tax exemptions. Senate Bill 4 was approved on March 20, 2013, and is now going to the House. This legislative attempt is to address a vague provision in the Pennsylvania statutes that authorizes exemptions for institutions that qualify as a “purely public charity,” but does not define the term.

SOUTH CAROLINA.House Bill 3091 is worthy of discussion. On one hand, it extends the number of exemptions which charitable organizations may enjoy from the registration and reporting requirements under the statute. On the other hand, it takes away by requiring any professional fundraiser, fundraising counsel, or commercial co-venturer working with an exempt organization to register and make the very reports from which the charitable organizations are otherwise exempt.

TEXAS.The Texas Cancer Coalition formed to support efforts of state agencies has agreed to go out of business and wind up its affairs in the next sixty days. State agencies connected to the Coalition are the subject of inquiry and possible criminal charges. The Coalition currently has $613,000 on hand, and after all bills are paid, the balance will go to the state. (For more details, go to the Austin Statesman newspaper).* * * * *The Austin American-Statesman reported that the Office of the Texas Attorney General is investigating the Texas Law School Foundation and its flow of monies from the Foundation to law professors. While there are no allegations of violation of any applicable law, the Attorney General has phrased the investigation in the context of “determining propriety, transparency and accuracy.” According to the article another area of inquiry is a program under which the Foundation provided forgivable personal loans to some of the law professors on the recommendation of the dean of the law school.

OtherATHLETES’ CHARITIES.Charities formed by athletes was the subject of a report on “Outside the Lines,” aired on ESPN, which conducted an investigation of 115 charities founded by high profile athletes. The results of the investigation showed an inability or unwillingness of many of those top athletes to operate their charities in an efficient, ethical and effective manner.

CHARITY WATCHDOG.Paul Clolery of the Nonprofit Times wrote a wonderful editorial in April 1, 2013 issue, calling into question the motivation of some the “charity watchdogs.” The editorial talked about the industry letter that is circulating to challenge the changes that have been made by Charity Navigator not to count joint cost allocations. Joint cost allocations is an accounting practice for allocating expenses in accordance with GAAP. The editorial is recommended reading.

COMBINED FEDERAL CAMPAIGN REPORT.According to a report published in the Government Executive, federal employees pledged 5.3% less in 2012 as compared to 2011. The report further stated that 850,000 government workers contributed $258.3 million in the annual drive. In the previous year, the number of employees contributing was 960,000.

MAJOR GIFT REPORT.The Indiana University Lilly Family School of Philanthropy has issued a new report on major giving. The report found that the majority of gifts over $1 million come from donors who live in the same state or geographic region as the nonprofit or foundation.

NEW GIVING REPORT.Blackbaud has issued its “Charitable Giving Report: How Nonprofit Fundraising Performed in 2012.” According to the report, online giving grew by 10.7%, and giving to smaller organizations grew at a faster rate than giving to larger organizations. Gifts to religious organizations and educational organizations counted for 45% of all charitable giving in the United States.

NEW BUDGET PROPOSAL.Members of the nonprofit community expressed disappointment that the 2014 budget offered by the President would once again intend to cap the value of the charitable contribution deduction at 28%. Major trade associations, like Independent Sector, have expressed the concern that such a limitation would reduce the incentive for charitable giving. This is particularly important now when the federal government intends to do less and expects the nonprofit sector to do more.

NEW WEBSITE.The Charitable Giving Coalition has announced the creation of a new website to protect the charitable deduction. According to a press release, the site will highlight how charitable giving helps communities around the country. Visit the website.

Copilevitz, Lam & Raney, LLC

Copilevitz & Canter is a national law firm that has dealt with every state and federal law and regulator so we can perform services more effectively, quickly and affordably than general counsel. We represent tax-exempt organizations, professional fundraisers, commercial telemarketers and political callers in all aspects of First Amendment law. We are the nation's largest provider of state charitable fundraising registration services.